This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

November

IASB proposes amendments to IAS 7 and IFRS 7 regarding supplier finance arrangements

26 Nov 2021

The International Accounting Standards Board (IASB) has published the exposure draft 'Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7)' to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that would ask entities to provide qualitative and quantitative information about supplier finance arrangements. The deadline for submitting comments is 28 March 2022.

 

Background

The IFRS Interpretations Committee received a submission about supply chain finance arrangements asking:

  • How an entity presents liabilities to pay for goods or services received when the related invoices are part of a supply chain finance (or reverse factoring) arrangement; and
  • what information about reverse factoring arrangements an entity is required to disclose in its financial statements.

In response to that submission, the Committee published an agenda decision in December 2020. However, feedback and input received — in particular from investors and analysts — suggested the information entities provide about supplier finance arrangements applying existing IFRS requirements does not meet all investor information needs.

In response to that feedback, the Board tentatively decided to amend IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures to add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that would ask entities to provide qualitative and quantitative information about supplier finance arrangements.

 

Key proposals

The main proposals in ED/2021/10 Supplier Finance Arrangements (Proposed amendments to IAS 7 and IFRS 7) would: 

  • Not define supplier finance arrangements. Instead, the proposed amendments describe the characteristics of an arrangement for which an entity would be required to provide the proposed information and the amendments would also provide examples of the different forms of such arrangements that would be within the scope of the Board’s proposals.
  • Add a disclosure objective. Entities would have to disclose in the notes information that enables users of financial statements to assess the effects of their supplier finance arrangements on their liabilities and cash flows.
  • Complement current requirements in IFRSs by adding additional disclosure requirements about:
    • the terms and conditions of each supplier finance arrangement;
    • for each arrangement, as at the beginning and end of the reporting period:
      • a) the carrying amount of financial liabilities that are part of the arrangement and the line item(s) in which those financial liabilities are presented;
      • b) the carrying amount of financial liabilities disclosed under a) for which suppliers have already received payment from the finance providers;
      • c) the range of payment due dates (for example, 30 to 40 days after the invoice date) of financial liabilities disclosed under a); and
    • as at the beginning and end of the reporting period, the range of payment due dates of trade payables that are not part of a supplier finance arrangement.
    An entity would only be permitted to aggregate this information for different arrangements when the terms and conditions of the arrangements are similar.
  • Add supplier finance arrangements as an example within the liquidity risk disclosure requirements in IFRS 7 and the disclosure requirements regarding changes in liabilities arising from financing activities in IAS 7.

The deadline for submitting comments on these proposals is 28 March 2022.

 

Effective date

The Board intends to decide on the effective date after exposure. The amendments would be applied retrospectively in accordance with IAS 8. Earlier application would be permitted.

 

Additional information

The following additional information is available on the IASB website and on IAS Plus:

 

ICAEW concludes series on IPSAS vs IFRS

26 Nov 2021

Over the recent months, the Institute of Chartered Accountants in England and Wales (ICAEW) published a series of reviews of major standards looking at the differences between International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSASB), and the suitability of each in public sector financial reporting. The fourth and final part of the series has now been released.

When introducing the series, ICAEW noted that IFRS are internationally recognised and widely adopted which brings about consistency in financial statements which in turn facilitates cross border comparability and understandability. On the other hand, IPSAS are designed for public sector entities whose main objectives are to provide goods and services to benefit society and to redistribute wealth. Therefore, the ICAEW series looked into the question what is the better choice of standards if a government were to adopt accrual accounting now.

The complete series of in-depth reviews can now be accessed on the ICAEW website:

Joint webinar on the IASB exposure draft on disclosure requirements

26 Nov 2021

EFRAG, BusinessEurope, and the IASB will host a joint webinar on 10 December 2021 on the IASB’s exposure draft 'Disclosure Requirements in IFRS Standards—A Pilot Approach (Proposed amendments to IFRS 13 and IAS 19)'.

The joint webinar will inform constituents about the IASB/EFRAG field test results as speakers and panellists will discuss the application of the IASB proposals and their experience during the field test. Audit implications will also be discussed along with a first reaction from the users. Interested preparers that could not participate in the field test will also have the opportunity to provide their input.

For more information and registration, please see the press release on the EFRAG website.

EBA report on IFRS 9 implementation

25 Nov 2021

The European Banking Authority (EBA) has published a report summarising the findings arising from the monitoring activities on the IFRS 9 implementation by EU institutions. EBA notes significant efforts in IFRS 9 implementation by EU institutions, but cautions on some of the observed accounting practices, especially in the context of the COVID-19 pandemic.

The report observes that EU institutions have made significant efforts to implement and adapt their systems to the IFRS 9 requirements since its first application date. However, the level of judgement embedded in the standard leaves open the possibility to use a wide variety of practices. In addition, the COVID-19 pandemic added to divergence. The report concludes:

  • Divergence in some accounting practices is due to the inherent flexibility embedded in IFRS 9 and the limited experience to date.
  • The COVID-19 pandemic pushed IFRS 9 models outside their boundaries, thereby increasing the use of manual adjustments, or overlays, with divergent results on the final expected credit loss amount.
  • Some practices observed, particularly in the context of COVID-19, would deserve further scrutiny from supervisors in particular to ensure a timely assessment of a significant increase in credit risk.

Please click to access the full report through the press release on the EBA website.

We comment on the IASB's management commentary proposal

24 Nov 2021

Deloitte has commented on the exposure draft 'Management Commentary' published by the IASB in May 2021.

We welcome the Board’s project to revise the Practice Statement on Management Commentary. However, we believe that further improvements are necessary on the following issues:

  • The Practice Statement would benefit from clearer concepts to help preparers and users understand its underlying thinking and to set a context for the type and range of disclosures envisaged.
  • We do not think that it is sufficient to measure financial outcomes alone as appears to be proposed in the Exposure Draft.
  • We suggest restructuring the Practice Statement to make it easier to navigate and apply, for example, by reducing the number of elements. In our view, these elements overlap in many aspects and their interaction and purpose is not always immediately understandable. We suggest a closer alignment to the <IR> Framework, whose structure includes fundamental concepts, guiding principles for the preparation and presentation of an integrated report, content elements that are fundamentally linked to each other, and high-level and specific objectives for each content element.
  • We suggest that the approach to materiality set out in the Practice Statement should articulate more clearly that it necessitates the application of a filter to identify a subset of impacts that are relevant to enterprise value and are therefore material to the information needs of users of management commentary.

In addition, since this project commenced, the IFRSF has made a significant move towards establishing global sustainability standards. We think the Board should therefore consider the future direction of the project in the light of this development.

Please click to download our full comment letter here.

Agenda for the December 2021 ASAF meeting

23 Nov 2021

The International Accounting Standards Board (IASB) has released an agenda and meeting papers for the meeting of the Accounting Standards Advisory Forum (ASAF), which is to be held by remote participation on 9-10 December 2021. A summary of the agenda is set out below:

Thursday 9 December 2021 (11:00-14:45)

  • Intangibles — ASAF members will share preliminary feedback on EFRAG’s Discussion Paper Better Information on Intangibles.
  • Strategic / agenda consultations — ASAF members will discuss any recent strategic / agenda consultations in their jurisdictions and discuss how it compares to the feedback on the IASB’s Third Agenda Consultation.
  • Agenda planning and feedback from the previous ASAF meeting — ASAF members will provide views on topics for future meetings and any comments on how the feedback from the October 2021 ASAF meeting has been (or will be) used by the staff or the Board.

Friday 10 December 2021 (11:00-14:45)

  • Goodwill and impairment — ASAF members’ views on staff examples illustrating the information the staff expect an entity to disclose applying the Board’s preliminary views expressed in the Discussion Paper Business Combinations — Disclosures, Goodwill and Impairment.
  • Disclosure initiative — Subsidiaries without public accountability: Disclosures — ASAF members’ views on the scope of the draft Standard.
  • Disclosure Initiative — Targeted Standards-level review of disclosures — ASAF members will have the opportunity to share feedback from their jurisdictions on the Exposure Draft Disclosure Requirements in IFRS Standards—A Pilot Approach.

Agenda papers for the meeting are available on the IASB website.

Agenda for the November 2021 Islamic Finance Consultative Group meeting

23 Nov 2021

An agenda has been released for the meeting of the Islamic Finance Consultative Group that will be held by remote participation on 30 November 2021.

A summary of the agenda is set out below:

Tuesday 30 November 2021 (08:55-10:45)

  • Post-implementation review of IFRS 9 — Classification and Measurement
  • IFRS 17 Insurance Contracts and Takaful
  • IASB Update

Agenda papers for the meeting are available on the IASB website.

Interesting in this context is also a paper prepared for the latest meeting of the Asian-Oceanian Standard-Setters Group (AOSSG) that discusses IFRS 17 adoption and Takaful in Indonesia, Malaysia, Pakistan, Saudi Arabia, and Syria. Please see the paper on the AOSSG website.

November 2021 IASB meeting notes posted

23 Nov 2021

The IASB met in London on Monday, Tuesday and Friday of the week beginning 15 November 2021. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

The following topics were discussed:

Third Agenda Consultation: The Board published its Request for Information (RfI) Third Agenda Consultation in March 2021. The staff provided the Board with a summary of the feedback on the RfI. Most respondents commented on the strategic direction and balance of the Board’s activities and supported the Board’s current strategic direction. In terms of specific projects, most respondents rated climate-related risks, cryptocurrencies and related transactions, and intangible assets as high priority. Many rated going concern, pollutant pricing mechanisms, and the statement of cash flows and related matters as high priority. The Board gave initial reactions to the feedback presented but did not make any decisions.

Goodwill and Impairment: In September 2021, the Board decided to prioritise making tentative decisions about proposing disclosures about business combinations and perform further analysis of the feedback received on the subsequent accounting for goodwill. In this meeting, the Board continued to make tentative decisions about the package of disclosures about business combinations. The Board decided to require disclosure of quantitative information about expected synergies from a business combination but not to define ‘synergies’. The Board decided that rather than requiring an entity to explain when expected synergies from a business combination are expected to be realised they should be required to disclose information about when the benefits from synergies are expected to start, and the expected duration of those benefits.

Primary Financial Statements: The Board decided to retain ‘providing insight into management’s view of an aspect of performance’ as the objective of the requirements for MPMs and ‘management’s view of an aspect of performance’ in the definition of MPMs. The Board also voted in favour of establishing a rebuttable presumption that a subtotal of income and expenses included in public communications outside financial statements represents management’s view of an aspect of performance, allow an entity to rebut the presumption when there is reasonable and supportable information demonstrating that a subtotal of income and expenses does not represent management’s view of an aspect of performance and provide application guidance on how to assess whether there is reasonable and supportable information to support the rebuttal. The Board also decided to narrow the scope of public communications considered for the purposes of applying the definition of MPMs to exclude oral communications, transcripts, and social media posts. The Board agreed to add application guidance clarifying how an entity applies the requirement to describe an MPM in a clear and understandable manner that does not mislead users.

Board Work Plan—Timing of PIRs: The Board decided to begin the PIR of the impairment requirements of IFRS 9, and IFRS 15 in the second half of 2022 and consider in the second half of 2022 when to begin the PIR of the hedge accounting requirements of IFRS 9, and IFRS 16.

Post-implementation Review of IFRS 10-12: The purpose of this session was for the Board to conclude which, if any, topics it could consider further. The staff have identified as medium priorities: the relationship between substantive rights and protective rights; a change in relevant activities during the life-cycle of an investee; assessing non-contractual agency relationships and accounting for disproportionate share of output compared to share of ownership. The Board did not vote on the topics and instead requested that the staff prepare a further paper setting out the proposed strategy for PIRs including the relationship between PIRs and agenda consultations. After that, the Board will decide which topics from the IFRS 10-12 PIR to take forward. 

Dynamic Risk Management: The Board decided to revise the definition of the target profile to “the range (risk limits) within which the current net open risk position can vary while still being consistent with the entity’s risk management strategy”. They also decided introducing the risk mitigation intention, described as “the extent to which an entity intends to mitigate the current net open risk position through the use of derivatives”. The Board agreed that no further refinements to the DRM model are needed in respect of the designation of a portion of prepayable assets.

Second Comprehensive Review of the IFRS for SMEs Standard: The Board continued to deliberate specific sections of the IFRS for SMEs Standard that could be aligned with IFRS requirements. The Board decided against aligning Section 20 of the IFRS for SMEs with IFRS 16 at this point. They decided to revisit the decision at a later time. However, the Board agreed with aligning the IFRS for SMEs with the 2011 amendments to IAS 19 in respective of the recognition requirement for termination benefits. The Board decided to retain the accounting policy option in paragraph 28.24 of the IFRS for SMEs Standard to present actuarial gains and losses either in profit or loss or in other comprehensive income.

Rate-regulated Activities: In January 2021, the Board published Exposure Draft ED/2021/1 Regulatory Assets and Regulatory Liabilities. Most respondents agreed with the proposals to present all regulatory income minus all regulatory expense, including regulatory interest income and regulatory interest expense, as a separate line item immediately below revenue. Most respondents who commented agreed with the focus of the proposed overall disclosure objective on information about an entity’s regulatory income, regulatory expense, regulatory assets and regulatory liabilities. Some suggested the Board develop a broader overall objective of providing users of financial statements with information about the nature of the regulatory agreement, the risks associated with it and its effects on an entity’s financial performance, financial position or cash flows. Most respondents did not support the proposed requirement to apply the Standard retrospectively on initial application. Most respondents who commented asked for a longer transition period. The Board gave initial comments on the topics discussed but did not make any decisions.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

Updated IASB work plan — Analysis (November 2021)

23 Nov 2021

Following the IASB's November 2021 meeting, we have analysed the IASB work plan to see what changes have resulted from the meetings and other developments since the work plan was last revised in October 2021.

Below is an analysis of all changes made to the work plan since our last analysis on 1 November 2021.

Standard-setting projects

  • Disclosure initiative — Subsidiaries without public accountability: Disclosures — Feedback on the exposure draft will now be discussed in Q2 2022 (previously H1 2022)
  • Disclosure initiative — Targeted standards-level review of disclosures — Feedback on the exposure draft will now be discussed in Q2 2022 (previously Q1 2022)
  • Rate-regulated activities After the discussion of the feedback on the exposure draft in October and November 2021, a decision on the project direction is now expected in December 2021

Maintenance projects

  • Non-current liabilities with covenants — After publication of the exposure draft on 19 November 2021 the next project step in now the discussion of the feedback on the exposure draft in H1 2022; the project has also been renamed from the previous Classification of debt with covenants as current or non-current

Research projects

  • Dynamic risk management — A decision on the project direction is now expected in Q1 2022 (previously H1 2022)
  • Equity method — A decision on the project direction is now expected in Q1 2022 (previously no date given)
  • Extractive activities — A decision on the project direction is now expected in H2 2022 (previously H1 2022)
  • Goodwill and impairment — A decision on the project direction is now expected in Q2 2022 (previously Q1 2022)
  • Pension benefits that depend on asset returns The publication of a project summary is now expected in H1 2022 (previously no date given)

Other projects

  • IFRS Taxonomy Update — 2021 General improvements and common practice The date entry for a proposed update (December 2021) has been removed from the work plan
  • IFRS Taxonomy Update — 2021 technology update Newly added to the work plan with an expected date December 2021for the proposed update
  • Sustainability-related reporting The entry that was erraneously kept in the work plan has been removed with the announcement of the creation of the new ISSB

The above is a faithful comparison of the IASB work plan at 1 November 2021 and 23 November 2021. For access to the current IASB work plan at any time, please click here.

European Union adopts IFRS 17 — with annual cohort exemption

23 Nov 2021

The European Union has published a Commission Regulation endorsing IFRS 17 'Insurance Contracts', albeit with an exemption regarding the annual cohort requirement.

The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 23 November 2021.

The regulation adopts IFRS 17 Insurance Contracts and the June 2020 amendments to IFRS 17 with the same effective date as the IASB (1 January 2023). However, the regulation provides an optional exemption from applying the annual cohort requirement that relates to the timing of the recognition of the profit in the contract, the contractual service margin, in profit or loss. Entities making use of the exemption are not applying IFRSs as issued by the IASB and need to disclose the fact. The regulation states:

Investors should be able to understand if a company has applied the exemption from the annual cohort requirement for groups of contracts. A company should therefore disclose in accordance with International Accounting Standard 1 Presentation of Financial Statements, in the notes to its financial statements the use of the exemption as a significant accounting policy and provide other explanatory information such as for which portfolios it has applied the exemption.

The regulation also notes that Commission should by 31 December 2027 review the exemption from the annual cohort requirement taking into account the IASB post-implementation review of IFRS 17.

EFRAG has updated its endorsement status report to reflect the adoption.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.